Transactions on the commodity exchanges fall into two broad categories: cash contracts and futures contracts. Accordingly, the commodity exchange may be a cash market or a futures market or may combine both. The cash contracts for the purchase of sale of commodities are those which call for payment of the full contract price in cash on delivery. Such contracts are made in the cash or physical market. In fact, they are also referred to as physical contracts in the sense that they deal in actual or physical products. The cash or physical contracts may be sub-divided into two sub-classes: spot contracts and forward contracts.
Spot transactions are those cash contracts which involve the payment for the price by buyer and the delivery of the specified grade of goods by seller immediately or within a short time. These contracts relate to the purchase or sale of commodities on spot. The essence of such contracts is the ready delivery and acceptance of the delivery of the goods sold. Forward dealings are those cash contracts made in the cash or physical market, which call for the delivery of goods and payment of the price after a specified period on a fixed date.
As against cash contracts, which require the payment or cash against physical delivery of goods immediately on spot or after a specified period, a futures contract is a special type of agreement made strictly under the rules of a commodity exchange which may or may not call for the actual delivery of goods and payment of price in cash on a future trade.
Future contract can be defined as a contract for the future delivery of some commodity without reference to specific lots, made under the rules of some commercial body, in a set form, by which the conditions as to unit of amount, the quality and time of delivery are stereotyped and only the determination of the total amounts and the price is left open to the contracting parties.
Related Articles of Interest :
-
Commodity Futures Tradings
10 August 2010 8:30 PM |
No Comments
Compared to cash contracts, which require payment against the physical delivery of goods immediately or after a specified period, a futures contract is a special type of agreement made strictly under the rules of a commodity exchange, which may or may not call for the...
-
Futures Options Trading
10 August 2010 8:30 PM |
No Comments
A forward contract is a customized contract between two parties to buy or sell a specified quantity of a particular commodity at a specified price on a specified future date. Futures are exchange-traded forward contracts, i.e., forward contracts done in organized exchanges like stock or...
-
Commodity Future
10 August 2010 8:30 PM |
No Comments
Future trading is the most notable feature of business activity on the commodity exchange. In fact the commodity exchanges are organized mainly for futures contracts. The futures contracts are made for distinct purposes: speculation and hedging. Accordingly they are either speculative or hedging contracts. Speculative...
-
Futures Trading
10 August 2010 8:30 PM |
No Comments
All futures contracts are generally made for the purpose of speculation or hedging. As such, the general procedure for settlement is the neutralization of the original contract by an opposite contract on settlement, so that only difference between the current and the contract price is...
-
Commodity Brokers
10 August 2010 8:30 PM |
No Comments
Speculative activities on commodity exchanges are undertaken by operators who have enough resources and speculate regularly. These operators are called brokers. Speculative deals on commodity exchanges fall into four categories. Firstly, there are forward deals which are the usual speculative transactions in which a person...
-
Online Futures Trading
10 August 2010 8:30 PM |
No Comments
If one were to look at the history of selling and buying of commodities, then you would see that the idea of trading in futures has been pretty much going on since the concept of trading in goods and produce in agricultural goods began. Farmers...
-
Online Futures Tradings
10 August 2010 8:30 PM |
No Comments
The futures markets are organized and used not only for speculation but also for hedging, which is a method of eliminating risks arising from fluctuations in prices. Hedging may be referred to as the practice of covering the risks attaching to transactions in the cash...
-
Online Commodity Trading
10 August 2010 8:30 PM |
No Comments
Traditionally, commodities were things of value that were produced in huge quantities by a lot of different producers for commercial sale. Despite being produced by different producers, the value of the commodity was equivalent. Trade in commodities, ranging from agricultural produce like corn to natural...
-
How To Invest In Stocks
10 August 2010 8:30 PM |
No Comments
A stock, also referred to as a share, is commonly a share of ownership in a corporation. A stock exchange is a market in which securities are bought and sold, and it is an essential component of a developed capital market. It is indispensable for...
-
Online Commodity Trading Advertisers
10 August 2010 8:30 PM |
No Comments
Online commodity trading advisors can be individuals or organizations that advise people on buying or selling commodities. They are registered with the Commodity Futures Training Commission. Registration for commodity-trading advisors is done through the National Futures Association, which is a self-regulated association responsible for reviewing...